British ruling in key motor-finance case
Britain’s highest court has upheld an appeal against a previous finding that certain commissions paid to car dealerships for arranging loans were unlawful.
The Court of Appeal had found in favour of three claimants, who had brought cases against the car dealers.
In all three cases, the customers had bought cars on credit, with only one offer of finance presented to, and accepted by, the buyer.
Dealer ‘retains own interest’
A decision in favour of the customers could have opened the way for thousands of customers to claim redress.
“The dealers in the present cases were not subject to any fiduciary duty towards their customers,” stated.
“It is, in our judgment, inherent in the arm’s length status of the dealer at all times during the negotiation of the typical transaction that it retains its own interest as seller, i.e. that it continues throughout to pursue its own commercial interests, free of any undertaking, express or implied, to act selflessly in the finding and negotiation of a finance package,” the judges said.
Markets effect
The court had delivered its judgment at the unusual time of 4.35pm on Friday evening (1 August) after advice from Britain’s Financial Conduct Authority (FCA), which told the court that the outcome could affect the share prices of companies involved in the motor-finance market.
The judges found, however, that the relationship between lender and consumer in one of the cases was “unfair”, based on the size of the commission, the failure to disclose the commercial tie between the financial company and dealer, and the customer’s failure to read any of the documents provided.
The Law Society Gazette of England and Wales reported that the FCA had announced plans to consult on an industry-wide scheme to compensate customers who were treated unfairly. The scheme is designed to avoid the need to use a claims-management company or law firm.
Earlier this year, lawyers at Mason Hayes & Curran said that the outcome of the case could have an impact on the commission structures in the motor-finance industry in Ireland.